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Endogenous entry/exit as an alternative explanation for the disciplining role of independent analysts

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  • Lys, Thomas Z.
  • Sunder, Jayanthi

Abstract

Gu and Xue [2008. The superiority and disciplining role of independent analysts. Journal of Accounting and Economics, this issue, doi:10.1016/j.jacceco.2008.02.002] study the disciplining effect of independent analysts on the accuracy and forecast relevance of the forecasts of non-independent analysts. One of the intriguing results is that while independent analysts issue inferior forecasts, their presence appears to reduce the forecast bias, improve the forecast accuracy and increase the forecast relevance of forecasts issued by non-independent analysts. We explore alternative explanations for the Gu-Xue results. Our evidence of endogenous entry and exit of independent analysts provides a more compelling explanation for the reported results.

Suggested Citation

  • Lys, Thomas Z. & Sunder, Jayanthi, 2008. "Endogenous entry/exit as an alternative explanation for the disciplining role of independent analysts," Journal of Accounting and Economics, Elsevier, vol. 45(2-3), pages 317-323, August.
  • Handle: RePEc:eee:jaecon:v:45:y:2008:i:2-3:p:317-323
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    References listed on IDEAS

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    1. Yonca Ertimur & Jayanthi Sunder & Shyam V. Sunder, 2007. "Measure for Measure: The Relation between Forecast Accuracy and Recommendation Profitability of Analysts," Journal of Accounting Research, Wiley Blackwell, vol. 45(3), pages 567-606, June.
    2. Gu, Zhaoyang & Xue, Jian, 2008. "The superiority and disciplining role of independent analysts," Journal of Accounting and Economics, Elsevier, vol. 45(2-3), pages 289-316, August.
    3. Collins, Daniel W. & Kothari, S. P., 1989. "An analysis of intertemporal and cross-sectional determinants of earnings response coefficients," Journal of Accounting and Economics, Elsevier, vol. 11(2-3), pages 143-181, July.
    4. repec:bla:joares:v:35:y:1997:i::p:167-199 is not listed on IDEAS
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    Cited by:

    1. Gu, Zhaoyang & Xue, Jian, 2008. "The superiority and disciplining role of independent analysts," Journal of Accounting and Economics, Elsevier, vol. 45(2-3), pages 289-316, August.
    2. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.

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